Foreign companies face greater scrutiny when bidding for Canadian companies

Global Business

In May, Canada struck down a more than one billion dollar offer from one of China’s largest construction companies to buy AECON, one of Canada’s top makers of infrastructure. The reason cited: national security concerns. The decision triggered a negative reaction from China but experts say China shouldn’t take it personally. Deals across the board face greater scrutiny than ever before.

CGTN America’s Karina Huber reports.

Aecon is one of Canada’s biggest construction companies. It helped build Toronto’s CN Tower and numerous other infrastructure projects all across Canada. In order to grow globally and within Canada, the company accepted an over one billion-dollar bid from China Communications Construction or “CCCI”, a Chinese state-owned enterprise. But the deal was blocked by Canadian regulators in May on national security concerns.

“We saw what we thought was a win-win situation for Canada, for China, for AECON for CCCI being lost. But at the end of the day we have to respect the decision of the government of Canada and the rationale or the reasons that they gave,” said Brian Tobin, Chairman of Aecon’s Board of Directors.

The Canadian government does not give an explanation as to what part of the deal poses a potential threat but AECON does have building contracts with nuclear power facilities in Canada. Some Canadians worried about a Chinese state-owned enterprise owning a builder of vital Canadian infrastructure and pushed for Ottawa to reject the deal. China was not happy. China’s ambassador to Canada Lu Shaye slammed the decision in an opinion piece in one of Canada’s leading newspapers saying Canada’s rejection of AECON shows that Chinese enterprises are suffering from unfair treatment.

Dany Assaf, co-chair of competition and the foreign investment group at law firm Torys in Toronto, said China isn’t being singled out but said it is harder to get deals approved.

“More specific and difficult questions are being asked in the context of 21st century realities – whether they’re security or technology related of trying to figure out precisely where would the security concerns arise today that may have gone unnoticed or been not accessed as a risk in the past,” said Assaf.

Assaf said countries that are not long-standing allies of Canada do face greater scrutiny but Canada’s prime minister said China remains an important trading partner.

“Having a clear framework and a positive relationship with China is going to be important. What we’ve always said is we need to make sure that that happens well and right and in a way that defends Canadian interests and this is an example of the kinds of challenges that exist anytime one looks to work closer with China,” said Justin Trudeau, Canada’s Prime Minister.